The Work and Pensions Committee has launched an inquiry into the new State Pension - set to be introduced next April - after concerns were raised that many of those who will be affected do not know enough about the changes or exactly what they will mean for their pensions.
A statement warned that people who are close to retirement now and may have done most or all of their retirement planning and saving under the ‘old’ system are most at risk.
“Although in the long term the reforms will simplify the State Pension, the transition period will be long and complex, and there is a lot of uncertainty among people who will be affected about the impact of the reforms, especially for those now closest to State Pension age,” it read.
While the committee noted that many people are expected to be better off, those with less than ten years of National Insurance contributions will no longer receive any State Pension and people will no longer be able to count on a percentage of their spouse’s pension after their death.
Committee member Jeremy Quin MP explained that this inquiry will be looking closely at the implementation of the new State Pension and the government’s communication strategy around it.
Frank Field MP, the committee’s chairman, added that their predecessor committee’s report on State Pension changes stressed need for good communications in advance of the changes.
“There is a sense that government has somewhat moved the goalposts in retirement savings without providing enough information about what are, in the end, complex changes, and a risk that some people may face a shock when they come to claim their pension,” he added.
The deadline for written submissions is 30 November.
The inquiry follows research by consultancy Hymans Robertson earlier this week, which suggested that less than half those reaching State Pensions Age shortly after 2016 will earn a full single tier pension of £155 per week.
With the new single tier system less than six months away, the firm argued that there will be winners and losers to the tune of thousands of pounds, with partner Sue Waites stating that some will be very surprised at how much they actually get.
“The introduction of the Single Tier pension is hailed as an exercise of simplification, but working out who the winners and losers are is horrendously complicated.”
She suggested that over the long-term, the majority will lose under the new State Pension. “Under the current regime, although basic state pension accrual is limited to 30 years, additional State Pension can be accrued over an entire working life (potentially up to 50 years), under the new system it will be capped at 35 years with no additional State Pension so there will be less scope to build up a more generous entitlement.”
The only winner will be those who do not accrue additional State Pension at the moment. Typically these are the self-employed or not in employment, who are not entitled to credits towards additional State Pension.